Trading Styles: Find the perfect strategy according to your investor profile

When you decide to start trading in financial markets, one of the first crucial decisions is choosing which trading style best fits your personal situation. There is no single correct way to trade; the important thing is to identify which of the different trading styles will allow you to maximize profits while minimizing risks according to your available time and experience.

▶ Know the four main trading styles

The trading world is divided into four main categories, each with completely different characteristics, trading times, and risk levels. Understanding the specifics of each will help you make better decisions.

① Scalping: real-time operations

Time window: a few seconds to a few minutes

How does it work? Scalpers are traders who seek to take advantage of small price movements that occur over very short intervals. Instead of waiting for large changes, they execute multiple transactions in short periods, capturing the difference between buy and sell prices.

What you need to know: each individual trade yields modest gains, so total profitability depends on executing dozens or hundreds of transactions. For example, in cryptocurrency trading like ETH, price changes of 0.66% can be observed in just three minutes, presenting opportunities for scalpers.

This technique requires financial instruments with extremely high liquidity and volatility. When combined with high leverage, returns can be spectacular, but so are the risks of loss.

Is it for you? Scalping demands absolute concentration and constant presence in front of the screen. It requires quick reactions and automatic decisions. It is only recommended for dedicated professional traders or investors who can monitor operations continuously. If you work full-time or are a beginner, avoid this approach.

② Day trading: intraday operations

Time window: less than 24 hours, without holding positions at session close

How does it work? Unlike scalping, day trading allows operations that can extend for several hours within the same day. The trader buys and sells the same financial instrument before the day ends, without leaving positions open overnight.

What you need to know: this strategy takes advantage of daily volatility and requires instruments with good liquidity. It works in forex, cryptocurrencies, and CFDs. When volatility is high, price movements are larger, offering more profit opportunities but also greater risk. Liquidity allows easy entry and exit from positions when prices rise.

It is recommended to set stop-loss orders to protect capital in case of unexpected movements.

Is it for you? Similar to scalping, it requires active monitoring of price changes during the day. It is suitable for professional traders or those with enough flexible schedules. If your job demands your attention all day, this style is not ideal for you either.

③ Swing trading: capturing medium-term movements

Time window: days or full weeks

How does it work? Swing traders operate on fluctuations that last several days or weeks, without committing to long-term positions. The trader analyzes price patterns to predict when the market will enter bullish or bearish trends, taking advantage of each wave of movement.

What you need to know: it is a flexible strategy that does not require constant surveillance. Swing traders identify cycles where prices rise over days and then fall, repeating the pattern continuously. Although predictions are not always correct, when the market reading is accurate, profits are significant.

Is it for you? Swing trading is one of the most accessible options for beginners. It does not demand daily operations or constant presence in front of the screen. It is perfect if you want to trade without trading taking over your time. Operational costs are lower than in scalping or day trading, making it more economical to start.

④ Position trading: long-term investment

Time window: from weeks to years

How does it work? Position traders open positions with long horizons in mind, analyzing the market potential over years. These positions are maintained over extended periods, regardless of short-term fluctuations.

What you need to know: if a trader opens a position during a bearish market, and holds it without selling until the bullish cycle completes, the operation could last years. A concrete example: if someone had bought Amazon shares on January 1, 2014, at $18.21 and sold them on January 1, 2021, at $159.03, they would have captured a +140.82% gain. However, this requires selecting the right instruments and being prepared to hold positions without reacting to short-term negative movements.

Is it for you? This style does not require continuous operations or obsessive daily monitoring. It is ideal for investors who want trading to play a secondary role in their lives. It requires combining solid fundamental analysis with technical analysis to identify assets with real potential. Patience and emotional discipline are necessary to resist the temptation to close positions during temporary dips.

▶ Comparison of the four trading styles

▶ How to choose your ideal trading strategy

Selecting among these trading styles requires honest analysis of your personal situation. Consider these factors:

1. Your daily availability

This is the most critical factor. If you have a full-time job with little time margin, automatically discard scalping and day trading. Swing trading and position trading are realistic options if you can only dedicate a few hours outside working hours. Conversely, if you are a dedicated professional trader, any style is viable depending on your goals.

2. The type of asset you want to trade

Not all styles work equally across all markets. Use the following as a reference:

• Currency pairs like NZD/USD: They exhibit high volatility and constant fluctuations. Swing trading is particularly effective here, capturing movement waves without the need for ultra-short operations.

• Stocks with a clear trend (like Amazon 2014-2021): They show stable upward movements over the long term with less short-term volatility. Position trading is the ideal strategy, allowing you to benefit from years of growth.

• Cryptocurrencies: Their high volatility and liquidity make them accessible for scalping, day trading, or swing trading, depending on your experience.

3. Your capacity for technical and fundamental analysis

Each style favors a type of analysis:

• Scalping and day trading: Depend almost exclusively on technical analysis and the ability to read charts in real time.

• Swing trading: Requires solid technical analysis with basic fundamental analysis knowledge.

• Position trading: Demands mastery of fundamental analysis to identify companies or assets with real potential, complemented by technical analysis for timing entries.

Learn both disciplines to reduce the risk of significant loss.

4. Warnings about risk

⚠ Scalping and day trading are especially dangerous for beginners. These styles involve multiple operations in volatile markets, generate high operational costs, and require professional experience. Losses can accumulate quickly.

Final recommendations:

• Use stop-loss orders in any strategy you adopt
• Start with swing trading if you are a beginner; it is the safest entry point
• Position trading requires patience but rewards disciplined investors
• Adjust your strategy according to market changes; no method works indefinitely

Remember that trading styles are not permanent choices. You can evolve from one strategy to another as you gain experience and develop new skills. The key is to start with a realistic approach based on your available time, current knowledge, and risk tolerance.